Buying a Home in the Sun

Finding your own piece of paradise is everyone’s dream but can seem like a daunting, if not terrifying challenge.

A recent article from www.thisismoney.co.uk looks at how it’s done.

Firstly, finding the place

One of the fastest and easiest ways to search for properties abroad is to use the Internet. Popular sites include findaproperty.com, casa-Post.com, primelocation.com and casaquest.com. You can also try various property magazines like Homes Overseas, Foreign Property News and Exchange & Mart.

How do you raise the money?

If you can’t pay with cash, you have two options:

1. Extend your main mortgage

This is a cheap way of raising cash. The only problem is you may not be able to get a re-mortgage for more than 75% of the second property's price and if you can’t keep up payments you could end up losing both properties.

2. Take out a second mortgage

There are now various companies that give overseas mortgages from the UK, including Halifax, Abbey, Norwich & Peterborough Building Society and Barclays.

You can now also take out a mortgage in Euros. Banks offering euro mortgages include Abbey, Barclays and Natwest.

Taking out a mortgage in a foreign currency can be dangerous; for example if the pound weakens against the euro or dollar, your payments will increase. That said, there are also various tax and other advantages to buying in the foreign currency.

How much will it cost?

Apart from the actual price of the property, you’ll have to pay taxes and legal fees.

In France you’ll pay “between 10% and 15% of the house price” along with a ”regional tax and an occupancy tax if you live there more than eight months a year”.

In Spain, “taxes and legal fees will normally amount to 8%-10% of the property value”.

In Italy, “costs are between 8% and 12%”.

In Florida, allow “4% of the price of your holiday home to cover stamp duty, local taxes, legal fees and set-up costs”.

The expense doesn’t stop there…

If you’re in a communal development, you’ll have to pay community fees for the upkeep of the property along with water and gas bills and extra insurance costs. You’ll probably have to open up a local bank account so you can pay charges by direct debit too. Consult your agent or solicitor about any other local taxes you might have to pay.

What about the insurance and taxes?

If it’s a buy-to-let investment, you’ll have to declare your rental income to the British taxmen.

If you’re renting out your property it’s essential to have it adequately insured. There are a number of specialist insurers who cater for this. You can also ask your own home insurer if they will insure your property abroad.

How long will it take?

For France, it could take up to 20 weeks, whereas in Italy, Spain, Greece and Portugal it will take around 12 to 18 weeks.

“The longer it takes to complete the transaction the more at risk you are from rate fluctuations, which could add thousands to the real cost of the property”.

One way around this is to arrange a “spot transaction”. With this you can transfer funds straight away to the agent or seller abroad, in line with the current exchange rate at that time.

Although a quick purchase is always desirable, it’s always better to take your time and make sure you’ve thoroughly researched the property and location and understand all the legal implications and procedures.

A good Lawyer and trustworthy Real Estate Agent are absolutely essential.